A business model with wheels: driverless cars and data

by Eric Didier via StockSnap
by Eric Didier via StockSnap

Yesterday I talked about how the blockchain can underpin shifts in the car industry. As I mentioned, most of the utility revolves around the handling of data. Let’s look at that some more, because I believe it’s a much bigger use case than most realize, and one which will generate entirely new business models. What’s more, I don’t think it’s optional.

A report issued last year by McKinsey valued the annual revenue opportunity in car data by 2030 at between $450m and $750m. (I tend to not trust value figures given in reports like this as the variables used are subjective at best, but it serves to show that we’re talking about a lot.) Another McKinsey report highlighted that data collection will become a key focus of the automotive sector over the next few years.

I believe that the change will be deeper than that – driverless cars will do to the car industry what smartphones did to the telecommunications sector. The main function is still there, but the additional services blur business boundaries and move a large part of the value to the peripheral service providers.

Here is a list of just some of the services that autonomous car data can fuel:

  • Navigation
  • Toll payments
  • Usage-based insurance
  • Maintenance
  • Car cleaning
  • Shopping pick-up
  • Info-tainment

Bear in mind that the car companies can provide some of these, but most will end up being offered by tech or financial startups, or even innovative incumbents.

Toll payments is a particularly interesting use case, given that it could transform the financing of public roads. And it points to an entirely new, autonomous, data-driven business model.

In the current system, the user/driver pays the toll. But what if the car itself paid the toll, from its account that gets topped up when individuals pay to ride in it?

Each driverless car could become a self-sustaining business. Income would come not only from usage, but also from the “selling” of the data each car generates. For instance, a vehicle tootling around a city could earn 1 ether for each GB of data transmitted to municipal sensors. The local government could use that information to optimize its expenditure on road maintenance, garbage collection and other services.

Or, a municipality could use the data to calculate tariffs on roadside billboards, charging advertisers according to the number of cars that drive by (much like advertisers pay according to traffic on websites).

Vehicles could also earn income through in-car advertising. This could subsidize or even pay for in-car entertainment, which itself generates data that would be of value to content producers and lifestyle companies.

Autonomous cars will effectively be an extension of our mobile phone, something both Apple and Google are very aware of. After all, what will we do in the driverless car as we are ferried to our destination? Pretty much the same stuff we currently do on our smartphone: talk to friends or colleagues, listen to music, watch a video, check the news…

So, it makes sense that an account on our smartphone pays for our automobile use, automatically and according to how many kilometers we travelled. We hop in, press the sign-in button on the dashboard (which then connects the car to our phone), and sign out before we hop off.

Here’s where blockchain technology becomes an essential platform: the colossal sharing of data between our phones, the cars, the municipality and the related services.

Under today’s system, the sharing of data is possible but complicated, with permissions, APIs and security measures adding layers of friction and risk.

On a blockchain platform, access can be on a selective, needs-driven basis. Ownership can be shared when desired, and validity can be trusted in a frictionless, secure and flexible ecosystem.

Surprisingly, according to the McKinsey survey, privacy doesn’t seem to be a big issue. 88% of consumers were comfortable openly sharing their data with third parties. Interestingly, the figure went up to 93% in China, the country in which over three quarters of respondents would switch to a driverless car if no additional cost were involved.

The report does highlight the changing perception of data – that it can be used to pay for things.

“Data connectivity will generate a vast set of benefits that customers will likely want to pursue, leveraging their personal data as “currency.” The value represented by this “currency” is already significant and expected to grow rapidly over the years to come.”

While the survey focuses on the smart cars in production today, the findings are even more relevant to the autonomous cars of tomorrow.

Blockchain’s main innovation is a new way of handling information. So it’s not hard to see how, in an emerging sector that both generates and depends on data, the technology evolves from being a luxury to a necessity. Without it, friction will persist, inefficiencies will keep costs high and adoption will have to overcome even more obstacles.

With the development of resilient blockchain platforms that underlie the new services and business models, the rollout of autonomous cars will trigger a wave of further innovation and growth, based on the fluid and efficient handling of information. And metaphors referring to data as the “new oil” become even more appropriate and relevant.

Blockchain data storage

database

One relatively overlooked application of the blockchain is that of data storage. This is odd, given that the technology is all about data: moving it, sharing it and keeping it whole. So why the lapse of coverage?

It may just be my blinkers – data storage is not the most sexy of functions. But, having dug into it a bit over the past few days, I’m realizing how varied and important the solutions are. It’s not just the need for safe and reliable data to value just about anything we do… It’s also the increasing role that data plays in our lives. If data is the new oil, and the big data enthusiasts proclaim, then we really need to think seriously about how we handle and store it.

Here’s a brief overview of the main blockchain innovators in the data storage space:

The group that has been at it the longest is Scotland-based Maidsafe. It has been working on decentralized computing for over 10 years now, and it doesn’t rely on a blockchain for data storage (it has built a distributed alternative which, to my non-expert ears, sounds a lot less streamlined). It does, however, rely on a native cryptocurrency for incentives – MaidSafeCoin is now the 10th largest in terms of market cap. Users contribute unused computing capacity in exchange for the native cryptocurrency, which can be sold or used to pay for network services.

Instead of information being uploaded to a central server, it is broken up, encrypted and stored on random computers across the network – several times each, to ensure availability. Data is moved around the network as computers are turned on and off and as demand ebbs and flows from certain areas, to improve access, speed and security (information is difficult to hack if you don’t know where it’s going to be).

Maidsafe aims to do more than offer distributed storage – it wants to establish a “decentralized internet”, in which surveillance and data theft are impossible.

After a murky ICO in 2014, Maidsafe’s second funding round was a £1.3m equity crowdfunding October 2016 (lower than the target of £1.75m). The alpha network was released in August of 2016, and has encouraged an ecosystem of apps includes data storage, email, forums and video conferencing, with more to come. One drawback to this project is the long development time. It’s an ambitious goal, true, but over 10 years’ buildup – especially with distributed technology evolving as fast as it is – runs the risk of being obsolete before it starts. Not to mention the risk that other, more agile competitors that started later with a different tech base can overtake on the inside…

Such as Sia, for example. Rather than try to rebuild the internet from scratch, Sia is starting with data storage. Like Maidsafe, it aims to harness unused computer space to offer a low-cost, decentralized alternative to Amazon’s S3 and the like.

To that end the Boston-based company built a proprietary blockchain that uses smart contracts to handle the payment from the user to the space contributor. Payments are made in the native cryptocurrency Siacoin, currently 40th in terms of market cap.

As with Maidsafe, information is split up, encrypted and distributed, retrievable only with the user’s key.

After an initial crowdfunded round of $500,000 in early 2014, the first beta prototype was launched in 2015, with version 1.0 following in June 2016. Sia’s parent company raised a further $750,000 in September 2016, from VCs Raptor Group and Procyon Ventures.

Storj, based in the US, is another startup going after the enterprise storage market. It started out on the bitcoin blockchain (with transactions occurring off-chain), although it recently announced its intention to migrate to ethereum.

As with Sia, participants receive a native cryptocurrency (in this case, Storjcoin, currently #35 in the market capitalization rankings) in exchange for offering their storage capacity. After an initial ICO in June 2014 of almost $500,000, Storj raised a further $3m in February of this year from angel investors, making it the best-funded startup in the data storage space.

Testing of the network began in 2014, continued through 2015 and in April 2016, Storj launched in beta and was added to Microsoft Azure.

A spectacularly ambitious project comes from the BigChainDB stable: its public network IPDB, which stands for Inter-Planetary Database (next stop = the universe!). The project aims to be the database for the “emerging decentralized world computer” (possibly that of Maidsafe, but more likely to be that of Golem, a project focused on harnessing unused computing power rather than storage space).

Rather than try to turn a blockchain into a database, BigChainDB approaches the problem from the other direction – by adding blockchain functionality onto database technology (this may sound like trying to fit a round peg into a square hole, and I’m not a database technician so no expertise here, but it could lead to a more adaptable and flexible solution).

The Germany-based startup has managed to raise £5m so far, including €3m in a Series A last September from Earlybird Venture Capital, Anthemis Group, Digital Currency Group and innogy SE, among others.

The barriers to these becoming mainstream are 1) regulation, and 2) reliability.

If data is sensitive (and it often is), then someone is going to want to regulate it. “Sharing” is simply not possible with certain types (health, fiscal, etc.), and even if encryption and protection assure that only those who should access it can, the chance that others could gain access is enough for regulators and potential clients to hesitate, or even downright object.

It’s a bit like the decision between keeping your gold spread around the world (where it is more vulnerable, but on a piecemeal scale), or in a vault 600m deep in a mountainside (where it’s harder to get to, but if the bad guys do…).

The reliability issue is also going to be a concern for the important stuff (like identity, finance and government documents). Even with layers of redundancies, is it enough? Sure, distributed risk is preferable in that system failure is less likely. But what about responsibility? If the distributed system fails, no-one takes the blame, but also no-one makes up the loss.

However, the idea is interesting, and could well be where the internet is heading. Once the technology has advanced further and speed and distribution issues are ironed out, could it replace our current siloed format of storing data, with ownership, rights and other fundamental concepts in the murky area of this-is-not-what-we-meant-by-equal-access? Will the benefits and redistribution of wealth offset the humongous costs of changing the way the current system works?

Time (sorry, I mean the market) will tell.

A bouncy bitcoin visualization

Have you seen this? It’s totally hypnotic. You have been warned. It’s also beautifully done. And so over-the-top ridiculous that don’t be surprised if you find yourself laughing. BitBonkers is a physical representation of bitcoin transactions in 3d graphic form. I sat for a while and watched life pass me by, since I wasn’t involved in any of those transactions. And I thoroughly enjoyed myself.

bitbonkers

The balls represent transaction size. The block with the number is the most recent block, and its size. You can move the board around and look at it from any angle (no, you can’t tip all the balls off… although that would be fun!). The attention to detail in this visualization is totally unnecessary. And thoroughly delightful.